As the OG of the buy-now-pay-later trend which gripped Australian consumer habits before turning out to be an awful business strategy, it’ been a much softer landing for humm group (ASX: HUM) which had a very strong lending business to fall back on, unlike its hip, young BNPL competitors. 

For humm, which was established back in 1988 under its former name Flexigroup, its somewhat of a full circle turnaround for the company which has pivoted from the consumer-focused BNPL that competes with Zip and Afterpay. The struggles of consumer finance and deteriorating repayment delinquency have seen a major power struggle where humm’s consumer financial business was set to be acquired by Latitude Group (ASX: LFS) before major shareholder and director Andrew Abercrombie launched an impassioned defence to prevent the sale.  

The basis of his defence was that the bid undervalued humm and he has continued to back his judgement, acquiring 3,663,046 HUM shares since December 2022 for about $1.5 million. 

Those purchases have been backed up by the performance of humm whose transaction volumes for the quarter ended 31 March 2023 was up 11% in the previous corresponding quarter to $965.2 million. 

The biggest increase came from the flexicommercial division which recorded a 39% increase in volume to $382.2m while the consumer finance division, which offers BNPL payment services for purchases up to $30k, saw volume drop 2% to $583m. 

“Today’s results are a further demonstration of the disciplined approach we are taking to growing our core business in bigger ticket financing in both Commercial and Consumer Finance, in a profitable and competitive manner,” said humm group CEO, Rebecca James. 

“Our strategy of focusing on bigger ticket items in the Consumer business is continuing to gain traction with volumes in Big Things AU growing 31% on pcp. Receivables for Consumer Finance were up 3% on pcp, while net loss / ANR was down 37bps driven by improved performance. Repricing initiatives implemented in the first half are beginning to deliver results with cost of funds increases being partially passed on in the Consumer business.

“Margin compression from the unprecedented increases in funding costs during late FY22 and FY23 continues to work its way through the backbook and will be offset by higher gross income which grows in line with the volume increases across the Commercial and Consumer businesses.” 

With customer growth for BNPL services having stagnated across the industry, humm has reacted accordingly, reducing its year-to-date reductions in expenses by $15.8m. These cuts have been made by slashing marketing spend, cost savings from consolidation of customer service functions and lower transaction and regulatory costs. 

Further transaction volume reductions from the consumer finance business are expected with humm in the process of closing humm NZ and hummpro while restructuring its humm UK and bundll products. 

As of 31 March 2023, receivables of its Point of Sale Payment Plans (PoSPP) were $811.9m which represented a 4% increase on the previous year (3Q22: $781.3m). 

The Company remains the only profitable consumer BNPL operator listed on the ASX having reported $16.7 net profit for the Half Year ended 31 December 2022 from $243.7 revenue. Shareholders were rewarded with a 1 cent per share fully-franked interim dividend.